At its own valuation, the Ocado flotation is stacking up to be the biggest of the year, but no bargain for small investors. Above, the online grocer's Hatfield warehouse. Photograph: Stuart Clarke/Rex Features

The online grocer Ocado defied its critics today by shooting for a valuation of up to £1.37bn when it seeks a listing on the stock exchange later this month.

Ocado's advisers said they aimed to sell the shares at between 200p and 275p. If new investors do buy in at the top of that range – which would make it the biggest float of the year so far – it could crystallise a windfall of £427m for the starry club of investors and directors that have put their faith in the start-up, which has yet to turn a profit after a decade in business.

The elite group includes Al Gore, the former US vice-president; Jorn Rausing, the Tetra Pak billionaire; and, it emerged today, Goldman Sachs's chief executive, Michael Sherwood, who, along with the John Lewis Partnership, was one of the online grocer's original backers.

Despite volatile market conditions and scepticism from some analysts, Ocado pressed the button on the initial public offering (IPO) last month, confirming plans to raise £200m. Achieving the midpoint of that price range would give the retailer a market value of £1.2bn.

The company says the purpose of the float is to raise the cash required to expand its operations beyond its current base in Hatfield, Hertfordshire. However, it will also allow long-term investors, some of whom have been on board since 2000, who want to sell to do so. The prospectus details that up to 155m shares could be sold, which, if the float is priced at the top of the range, could net them a combined fortune of £427m.

The company is the brainchild of three former Goldman Sachs bankers: Jason Gissing, Tim Steiner and Jonathan Faiman. Their connections in the City and among the super-rich – Sherwood was their boss at Goldmans – are seen to have been key to Ocado's ability to attract funding.

Executives could share in a near-£28m payout from existing share options, most of which is expected to go to the founders. In addition, Caribbean trusts, of which Gissing and Steiner are the beneficiaries, are earmarked up to sell up to 2m shares each, which could be worth a maximum of £5.5m. A Swiss investment vehicle controlled by Faiman could sell 3m shares, worth up to £8.25m.

Ocado's chairman, Michael Grade, who is on a salary of £100,000, stands to collect a £100,000 "float bonus" in shares. After this month's listing, the management team, who will own 15%, have pledged not to sell any more shares for at least a year.

The John Lewis Pension Fund, which is the company's biggest shareholder with 26%, is set to halve its investment in the chain, booking a gain of up to £158m. Its fellow investor UBS plans to sell the majority of its holding, worth up to £100m.

An Ocado spokesman said Sherwood was holding on to his shares, worth up to £458,000, out of choice. He denied there was a conflict of interest – Goldmans is both a shareholder and one of the banks advising the company.

The devil, however, was in the detail for new investors, with the near 300-page prospectus suggesting that the company was a high-risk investment for small investors, including loyal shoppers, who have a chance to buy a piece of the action.

Customers who have spent more than £300 since the start of this year are eligible to buy shares but the document warns that the company does not "anticipate declaring or paying a dividend in the foreseeable future" as it continues to run up operating losses and pour cash into additional capital investments. Indeed, the "risks" associated with backing the internet venture run to 18 pages.

Customers and staff must have their application for shares in by 18 July; big City institutions have until 20 July. Conditional dealings are pencilled to start the following day. According to the IPO timetable, Ocado will be officially admitted to the London Stock Exchange on 26 July.

Directors say that the only thing standing between Ocado and profits is scale but analysts are less generous, arguing that its warehouse-based model is less efficient and more expensive that the multichannel operations of larger, profitable rivals.

Philip Dorgan, an analyst at Ambrian, thinks a "fair market valuation would be no more than £500m" and that the "numbers don't add up".

He said: "Over 10 years Ocado has consumed cash and never made a pre-tax profit. The economics of a pure play, sub-scale food retailer, with no brand equity, operating a warehouse picking model, delivering groceries to customers' homes, do not stack up."

One fund manager agreed, describing the pricing as "ambitious" – two weeks ago the company was expected to have a £900m equity value at the time of the float, rising to £1.1bn after the IPO.

The prospectus, however, values the equity 22% higher at £1.2bn, or £1.3bn after the float. It is double the valuation intimated in September when Generation, the investment firm chaired and co-founded by Gore, put £7m into the retailer, giving it a holding of just over 1%.

The prospectus says Ocado has more than 240,000 active customers and is able to "process over 100,000 per week". The retailer said it had hit this number for the first time in May. The document makes it clear that Ocado's hi-tech warehouse in Hatfield – the nucleus of the firm – is running at full pelt some weeks, and that it needs to use £80m of the cash it plans to raise "to increase effective capacity from approximately 105,000 to 180,000 order per week".

Ocado also says it needs to spend up to £10m a year "in the medium term" to open small support warehouses.

A second warehouse, which Ocado hopes to build in the Midlands, will cost about £210m and the IPO document says "it will be able to procure additional funding" to do this.

Until now the company had suggested its float proceeds would be used to build the new warehouse.

"Ocado is very much a 1990s tech-boom kind of business – look at the top line growing, don't worry about bottom line, don't worry about the cash consumptions, we are not going to pay you any dividends," said the fund manager, who declined to be named. "It doesn't do much for us."

After the float, Rausing's Apple Trust will replace the John Lewis Pension Fund as Ocado's largest shareholder and has pledged to hold what will be a 11.1% stake for at least 180 days.